Walt Disney always had Oz in mind for a future film project, and he kept his eyes open about the rights of the books. After Maud Baum's death, he inquired about the rights again and this time was able to pick up the film rights to eleven of the Baum books: Dorothy and the Wizard in Oz was optioned by another studio (for almost the same cost of the 11 books, he later got it) and the first two Oz books would soon be slipping into the public domain.
In 1957, it was announced that Walt planned to produce a live action musical Oz feature film featuring the Mouseketeers from The Mickey Mouse Club. On September 11, 1957, the Disneyland TV show had its "Fourth Anniversary" episode, which finished with the Mouseketeers "convincing" Walt to let them make The Rainbow Road to Oz with two musical numbers. Walt finally agrees, and they finish with the grand number "The Rainbow Road to Oz." It must be remembered that these were not film clips.
The late Annette Funicello was set to play Ozma, and I wrote about her death with more information on her and her brief time as Ozma, including showing the entire Oz segment. That blog can be found here. Darlene Gillespie played Dorothy, Tim Considine as Zeb, Kevin Corcoran was Button-Bright, Jimmie Dodd was the Cowardly Lion, Bobby Burgess was the Scarecrow, Doreen Tracy was the Patchwork Girl, and Karen Pendelton was Polychrome. Tommy Kirk was set to play the villain of the story, but appears only on the Disneyland episode as himself and is silent throughout the Oz segment.
The most famous thing about The Rainbow Road to Oz is that it was shelved. The reason was never made exactly clear. Some blame the songs or the appeal of the Mousekeeters not carrying over to film. Some believe the studio was put off by fearing comparison with the MGM film of The Wizard of Oz. While I do admit that most of the songs featured on the Disneyland episode were not up to the same standards of the Harold/Arlen score of MGM, a couple of songs were actually quite good: "The Rainbow Road to Oz" and "Why Don't They Believe?" It is more likely that the songs were works in progress and would have appeared quite revised and re-arranged for the finished film. Also, if Disney was concerned about the legacy of MGM, why on earth had they sunk so much money into acquiring the Oz books? It is not as if that could have been an afterthought.
My personal favorite explanation for the shelving is that the story and script (being constantly revised) were just not gelling, and Walt decided that if he was going to produce an Oz movie, it needed to have a story worthy of being an Oz story, and he shelved it deciding that this would not be a good time to produce such an Oz film.
This also answers why so few Oz films were produced for so long, aside from many adaptations of Wizard and an occasional version of Land: the Disney company was sitting on the rights. By the time the later Oz books were going into the public domain, Oz wasn't such a hot property, aside from the MGM film.
From what I've heard from numerous sources, Dorothy and her cousin Zeb would ride a tractor over the Rainbow to Oz (presumably meeting Polychrome on the way), where the Patchwork Girl would emerge from a patchwork quilt. The villain (possibly based on Ugu the Shoemaker) casts a spell on the Cowardly Lion, the current King of Oz, that makes him cruel and conceited, and Dorothy and her friends try to break the spell. And also, Ozma, the true heir to the throne of Oz, would be recovered. (As Disney hadn't optioned The Marvelous Land of Oz, I would not be surprised if this part was based on The Lost Princess of Oz.)
What remains of The Rainbow Road to Oz eventually found its way to commercial items. In 1965 and 1969, Disneyland Records produced four "story and songs" albums featuring Oz stories. Three were adaptations of Baum's Oz books, but one, The Cowardly Lion of Oz, was a completely original story, with songs. Many of the songs were actually originally intended for The Rainbow Road to Oz, particularly "Living a Lovely Life" and "If You Believe." ("If You Believe" was originally "Why Don't They Believe?") The book Disney's Lost Chords printed sheet music for "The Rainbow Road to Oz," "Patches," "Why Don't They Believe?" and "The Lost Princess Waltz." Finally, the entire Fourth Anniversary Show episode was released on Your Host, Walt Disney, part of the now-defunct Walt Disney Treasures line of DVDs.
As part of the publicity of Oz the Great and Powerful, D23 magazine featured The Rainbow Road to Oz in its Spring issue of 2013. The DVD and Blu-Ray releases of that film have the special feature "Walt Disney and the Road to Oz," which discusses the aborted project, including interviews with the Mouseketeers.
I have thought that perhaps The Rainbow Road to Oz could eventually be revived as a Pixar project, but it seems Disney will not be pursuing such a project for a long time, focusing on sequels to Oz the Great and Powerful instead.
The Disney company didn't give up on Oz. Over the years, an Oz animated television show or TV special was suggested. Theme park attractions were also conceptualized, but not realized. Some hints of Oz still turn up at Disney's parks, however. At Disney's Hollywood Studios, MGM's The Wizard of Oz is part of "The Great Movie Ride," and the Emerald City is part of the "Les Pays des Contes de Fées" attraction (a Fantasyland boat ride) at Disneyland Paris.
Still, even with these concepts, it would be some time before there would be a major Oz production by Disney.